Bush, Cheney, and Shwarzenegger dance to Ken Lay's tune

In an article published today by CommonDreams.org, Jason Leopold--who spent two years covering California's energy crisis as bureau chief of Dow Jones Newswires--writes that Arnold Schwarzenegger, Michael Milken, and others attended a secret meeting convened by Ken Lay on May 24, 2001 to hear Enron's plan for solving the crisis.

Meanwhile, Gray Davis was asking the Bush administration to enact price controls to rein in the obscene price gouging that was then going on in the state, where electricity reached a price of more than $200 per megawatt hour. Bush met with Davis on May 29 and washed his hands of the matter. It was the California legislature's fault for not fully deregulating the market, Bush said, and it was Davis's problem to fix. Davis had contended that Texas energy companies were manipulating the market.

Dick Cheney, who chairs Bush's energy task force, had also met with the now-disgraced boss of Enron about a month before. Lay had given him a memo that included eight recommendations for the national energy policy. Seven of the eight made it to the final draft--released in May, after the Schwarzenegger-Milken-Lay meeting, the Bush-Davis meeting, and a Frontline interview in which Cheney blamed the whole mess on the California state government.

But, says Leopold, Davis was right.

What’s unknown to many of the voters who will decide Davis’s fate on Oct. 7, the day of the recall election, is that while Cheney dismissed Davis’s accusations that power companies were withholding electricity supplies from the state, one company engaged in exactly the type of behavior that Davis described. But Davis would never be told about the manipulative tactics the energy company engaged.

In a confidential settlement with the Federal Energy Regulatory Commission, whose chairman was appointed by Bush a year earlier, Tulsa, Okla., based-Williams Companies agreed to refund California $8 million in profits it reaped by deliberately shutting down one of its power plants in the state in the spring of 2000 to drive up the wholesale price of electricity in California.

The evidence, a transcript of a tape-recorded telephone conversation between an employee at Williams and an employee at a Southern California power plant operated by Williams, shows how the two conspired to jack up power prices and create an artificial electricity shortage by keeping the power plant out of service for two weeks.

Details of the settlement had been under seal by FERC for more than a year and were released in November after the Wall Street Journal sued the commission to obtain the full copy of its report. Similarly, FERC also found that Reliant Energy engaged in identical behavior around the same time as Williams and in February the commission ordered Reliant to pay California a $13.8 million settlement.

Since that time, of course, have come the Enron collapse, revelations of memos detailing the rip-off scheme, and a wire-fraud conspiracy guilty plea byEnron's Timothy Belden, who Leopold says masterminded the scheme. But first impressions are lasting impressions, and the conspiracy to pin it on Davis had already succeeded before the truth got out.

It's worth noting that the energy industry's manipulation of the California energy market cost California an estimated $70 billion--almost twice the $38 billlion budget deficit that is the chief impetus behind the recall.

"Davis, who refused to cave in to the demands of companies like Enron even while Democrats, Republicans and the public criticized him, was right all along," says Leopold. "Maybe Californians ought to cut Davis some slack."